19 - Wednesday, February 14, 1990 - North Shore News BUSINESS TAX ADVISERS CAN’T ALWAYS ASK RIGHT QUESTIONS Expert believes everyone should try to do own return FILING AN income tax return is an annual chore we should all skip if we can, right? Wrong. This exercise doesn’t have to be so taxing — in fact, it could actually be tax saving. Every year since 1978 Mike Mallin has edited or co-authored the perennial best-seller Preparing Your Income Tax Returns. So f asked tax lawyer Mallin to take some time out from produc- ing this year's edition to share his knowledge with us. Co-authored by R.D. Hogg and published for the 25th year by CCH Canadian, the 1990 edition which covers 1989 tax returns is just arriving in book stores; it sells for $16.95. “Et believe that people should do their own tax returns if at all possible, or at least be actively in- volved in the preparation if they have somebody else do the job,’’ Mallin said. “Only you know the facts about your situation. No tax adviser can ask all the right questions. That’s why it pays off to prepare. “If you do your own return, you can use it as a checklist for tax planning. You don’t know whether there are opportunitics to save tax unless you look. And to do that, you have to know the rules."’ If your financial affairs are complicated, ‘‘get general financial or tax planning advice, rather than simply having somebody do your tax return.”" When you complete your own return, said Mallin, take a separate piece of paper and write down the things you should explore — topics that could offer opportunities to save tax. “That could be as simple as get- ting the RRSP guide each year to make sure you are making max- imum contributions,"’ he said. “Every year, go through the guide that comes with the return and note down things that could be valuable to you. Have a follow-up system — to get the appropriate form or literature, or meet with a financial adviser. For most people, itcan be that simple.” Then go through itself, line by line. “See this as an opportunity for tax planning as well as tax repor- ting,’’ Mallin said. ‘‘Keep a special the return 524-2288 3 YEARS — 11% VANCOUVER DOWNTOWN NORTH VANCOUVER GRANVILLE & 41ST 683-7283 983-3773 263-7283 REGIONAL NEW WESTMINSTER WHITE ROCK CALGARY §31-1123 note pad for any points worth fal- lowing up.*’ For example: * Employment income. Are vou teally an employee? If you could support a case that some or even all of your work was done as an independent contractor, you might be able to deduct quite a few ex- penses — a deduction an employee could not claim. dollars and sense Michael Grenby © Pensior income. If you are 65 or older but do not have any private pension income, you should probably create $1,000 pension income a year so you can claim the $1,000 pension income amount/credit. You can do this by converting some RRSP funds into a RRIF or annuily, or by using non-RRSP funds to invest in a:prescribed an- nuity or life insurance term deposits. If you don’t pay any tax, then this $1,000 pension income amount/credit could be transferred to and used by your spouse. Remember. 1989 is the last year you may transfer up to the total of all your pensions into your own RRSP and the first year you may put up to $6,000 of private pension income into your spouse’s RRSP. 266-7321 Would either or both of these ap- proaches make sense in your situa- tion? Deadline is March 1. ¢ Family allowance. The higher income carner usually has to declare the payments. But are you putting the baby bonus cheques in- to an account in the child's name? That way, the investment income produced by these funds will belong to the child for tax pur- poses. © Investment income. Plenty of tax-saving possibilities here. For example, pay cash for personal items and borrow for investment purposes (rather than the other way around) so the loan interest will be tax deductible. Track the source of funds that go into investments so family members in the lowest tax brackets can declare as much of the invest- ment income as possible. Capital gains generally receive the most favorable tax treatment. You must keep an annual running total of investment income and expenses — even when you have no capital gains — to claim the ex- emption when you do have a gain. Get form T936 from Revenue Canada; complete it) every year even if you don't have to file it. ® Business income. This offers the most flexibility for tax plan- ning, whether through paying fam- ily members, deducting expenses, or incorporating and possibly claiming an additional $400,000 capital gains exemption when you sell the business. ae Mike Grenby is a Vancouver- based columnist and independent financial adviser who will answer J your questions as space allows in his column. Write to him c/o North Shore News, 1139 Lonsdale Ave., North Vancouver V7M 2H4. F-A-S-T COLLISIGN REPAIRS CALL THE PROFESSIONALS AT JAYLORMOTIVE” 1959 LTD. FREE RENTAL COURTESY CARS B.C.A.A. APPROVED — A.R.A. CERTIFIED 1.C.6.C. VENDOR FOR ALL MAKES Javconmanve” QUALITY WORKMANSHIP TRUSTWORTHY SERVICE 174 PEMBERTON AVE. consutrarion NORTH VAN OR APPOINTMENTS 985-7455 iSunLife Trust MEMBER CANADA DEPOSIT INSURANCE CORPORATION GRSP—INTEREST COMPOUNDED ANNUALLY 1 YEAR | 2 YEARS|3 YEARS; 4 YEARS/|5 YEARS * 45 day rate guarantee on RSP transfers * Instant RSP tax receipt option % Special terms: 15-18 mo. — 11.4% c.a. 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